With the advent of globalization and now overwhelmingly by the arrival of the Internet, institutions and individuals face new challenges and seek new methods for facilitating financial transactions between parties domestically and internationally. The credit and debit card network has been the subject of prior art related to electronic money transfers using ATM machines, point of sale and other terminals. They provide solutions for performing funds transfer between a source account maintained by an institution affiliated with a network and individuals or entities with access to collection terminals on the network.
Tannenbaum, U.S. Pat. No. 5,326,960 (Jul. 5, 1994) and Brody et al., U.S. Pat. No. 5,350,906 (Sep. 27, 1994) describe the use of the ATM bank network to provide money transfers via fixed limit ATM cards. They describe a system where senders using temporary ATM cards and secret codes, transfer funds to a “master account” on a centralized computer, to which the beneficiary has access by using another temporary collecting card and the matching secret code previously assigned to the funds by the sender.
The system is an evolution over traditional money transfer methods used by specialized money transfer institutions like Western Union and MoneyGram. Terminals on the ATM bank network provide a 24 hours/day×7 days/week collection point for the beneficiary to pick-up the funds instead of having to rely on pick-up offices, clerks and business hours.
Marcous et al., U.S. Pat. No. 5,650,604, (Jul. 22, 1997) describe a cardless electronic money transfer method, based on ATM machines and on a secret code. It discloses a system where first, a customer, using an ATM, presents a request to the institution providing the money transfer, to withdraw a specific amount of funds from his account so that funds can be available to the one who first presents the secret code assigned to the funds. The second part of the transaction occurs when another individual requests the assigned funds, from the same or other ATM machine presenting only the secret code. The institution C providing the money transfer service will then disburse the code's value to the first presenter of the fund's secret code.
The system is similar to the one from Tannenbaum and Brody suppressing the use of temporary ATM cards and based exclusively on a secret code given to the sender by the input terminal at the purchase of the service. It also uses the same two-step processes where first, a sender using an ATM machine provides funds to be assigned to a secret code, and second, the money is disbursed to the one who first presents the matching secret code assigned to the funds.
Doggett et al, in U.S. Pat. No. 5,677,955 (Oct. 14, 1997) describe an electronic money transfer instrument suitable to institutions effecting a transfer of funds from an account of a payer in a funds-holding institution to a payee. The system can be portrayed as an electronic substitute for a check used to transfer funds from a source account at a financial institution to a beneficiary.
Simon, in U.S. Pat. No. 5,768,385 (Jun. 16, 1998) attempts to eliminate the plastic card, basing his electronic transaction model solely on a secret code. His system provides a standard protocol for financial institutions to create electronic “coins” and allow them to be exchanged between several banks all committed to disburse the value of a coin to the first presenter of the coin's secret code. It describes the use of one-way functions, encryption and mathematical algorithms so that only the possessor of the secret code could have access to a coin's funds. It is a broad expansion of the previous art assuming a mathematical and cryptographic model where electronic “coins” are exchanged among several banks, all committed to disburse a coin's value to the first presenter of the coin's electronic secret code.
Downing, et al, in U.S. Pat. No. 5,963,647 (Oct. 5, 1999) also rely on a secret code for their money transfer method. The system is another implementation of the coin-based money transfer model where funds are not collected from the source account until the second step of the transaction when a request is issued by the beneficiary at a collection terminal. The institution C providing the money transfer will only then collect the requested amount of funds from the source account institution B and disburse it to the beneficiary requesting the transaction on a collection terminal A. The method also describes the implications of international settlements, compliance regulations and exchange rate conversions.
Current systems and methods described in the prior art, though, present a similar problem related to their efficiency, complexity and liability. Institutions providing money transfers—either through the traditional method, with full disclosure of the target beneficiary by the sender or through the electronic coin method, recognizing the beneficiary through a secret code—are responsible for the collection and delivery of the funds. Funds collected from the source account institution are given to either the specified target beneficiary provided by the sender or to the first presenter of the coin's electronic secret code. The institution that provides the money transfer service C is assumed by the prior art to be responsible for settlement with both institutions involved in the transaction, collecting the funds from the institution where the source account is maintained B and delivering it to the institution that maintains the collection terminal A. Funds are collected either at the first step when the service is established and the target beneficiary or secret code is assigned or at the second step when funds are requested by the collection terminal and delivered to the ultimate beneficiary. When providing money transfers through any of the previous methods, institutions require connectivity and settlement capabilities with both the source account institution B and the institution that maintains the requesting terminal A.
As a result of the dual-entry system (accounting credits and debits) and its money accountancy implications, the process of collecting and disbursing funds creates a lock on institution's liability and cash flow requirements, growing it proportionally with increasing volume of transactions and the corresponding receivable-payable contract commitment dates (settlements). The problem derives from the fact that institutions cannot guarantee delivery of funds they do not possess and that is why commitments are previously established for their collection with the institution that maintains the source account B prior to guaranteeing its subsequent availability to the collection terminal A.
The electronic coin model as well as the traditional money transfer model used by banks and other specialized money transfer institutions like Western Union and MoneyGram presents a further problem related to the legal burdens of said institutions. In order to provide money transfers, the institutions have to collect, store and disburse someone else's funds. Consequently, they are required to be financial institutions regulated by banking departments. That implication exposes companies to the extensive regulatory complexities applied to institutions capable of holding and disbursing other people's money.
Institutions are also required to have sufficient cash flow in order to pay for transactions for which money has not yet been received from the source account institution B since commitments for the delivery of the funds to the collection terminal A happen prior to the settlement for the transfer of the funds between the institution that maintains the source account B and the institution that temporarily holds the funds C. Institutions C providing money transfers through present methods are required to perform two financial transactions, first collecting the money from the institution B where the source account is maintained and then transferring it to the institution A maintainer of the requesting terminal (ATM, POS, etc. . . . ).
Such unavoidable cash flow and liability burdens derived from the dual-transaction process (collection and disbursement) are impacts that money transfer service provider institutions C will face under the methods of Tannenbaum, Brody et al, Marcous et al, Doggett et al, Simon and Downing, et al. That impact is likely to produce higher operational costs and higher service prices to the final consumer. In contrast, the system of the invention relies on a direct financial transaction scheme that not only provides more flexibility, but also eliminates unnecessary liabilities and limitations derived from the previous methods.
The introduction of a third company, the service provider company C to serve as a temporary storage for the funds and to which funds are to be transferred to, and from which then transferred or disbursed; elevates the complexity of the money transfer model leading to additional overheads and diminishing its effectiveness. The system and method of the invention allows the trigger server D to provide other hosts and terminals, accounts and account approvals, triggering transaction requests between terminals and hosts, and not participate in the transaction itself or in any settlement related to the transfer of the funds.
In current systems and methods, institutions are required to establish connections to both other institutions involved in the transaction. Said money transfer institutions C are portrayed by previous methods as responsible for conducting and controlling the transfer of the funds; arranging for the collection of the funds from the source account provided and for its subsequent transfer to the terminal requesting the transaction. Institutions C performing money transfer through said methods require settlement capabilities with both institutions involved in the transaction. The institution that provides the money transfer service C is ultimately the one responsible for approving and delivering funds to the institution maintainer of the collection terminal A on all previous money transfer methods.
The specifics of the method by which the trigger server provides hosts and terminals with the source account component of a transaction, as well as possible response interactions between terminals and hosts and the trigger system will become apparent to those skilled in the art from the description which follows.